Personal Insolvencies in England and Wales Rise by 28.2%

New statistics released from the third quarter have revealed a significant 28.2% increase in personal insolvencies within the past year. The statistics, published by government body The Insolvency Service, reported 35,242 people throughout England and Wales became insolvent during the third quarter of 2009.

The quarterly released statistics reports the level of personal and company insolvency throughout the United Kingdom. Released on 6 November 2009, the latest figures detail the activity from June until the end of September this year. In addition to showing a large increase when compared to the same period last year, the number of personal insolvencies is also up 6.2% on the second quarter of 2009.

The figure was made up of made up of 18,347 bankruptcies, 12,390 Individual Voluntary Arrangements (IVAs), and 4,505 Debt Relief Orders (DROs).

During the third quarter, 85% of the bankruptcy orders were made on the behalf of the debtor, rather than the creditor. Although this is down on the previous quarter, the percentage of debtor bankruptcy petitions has been slightly higher throughout 2009. When compared to the same quarter in 2008, bankruptcy has risen by 6.4%.

However, The Insolvency Service stated in their release that some of the 4,505 Debt Relief Orders may have declared bankruptcy instead during the third quarter, had the new practice not been put in place earlier this year. Although it is thought the increase of bankruptcies would have been higher if not for the introduction of the DRO, it is impossible to predict what this figure would have been.

In contrast, Individual Voluntary Arrangements (IVAs) were up by 20.9% on the same quarter of 2008. The IVA is a debt solution that offers consumers a viable alternative to bankruptcy. An Individual Voluntary Arrangement (IVA) is a legally binding agreement in which a reduced payment plan is negotiated. IVAs usually take a five year period, and providing the terms of the arrangement are adhered to, debtors have a chance to settle some of their debt.

As the Debt Relief Order came into effect on 6 April 2009, it cannot be compared to the same quarter of 2008. The Debt Relief Order (DRO) was introduced to provide individuals in England and Wales an alternative route into personal insolvency. The new individual insolvency procedure is subject to some restrictions however, including that the consumer must have under £15,000 debt and must not own their own home.

The increasing unemployment, pay cuts and tight restrictions from lenders since the beginning of the recession are all factors contributing to rising personal insolvencies, which look likely to continue into 2010. Debt Free Direct recommends that anyone concerned about their level of debt should consider seeking debt advice from a reliable source before proceeding with any debt solution.

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